Today's Headlines

Bloomberg:
- Blackstone Group LP is exploring a bid for HCA Inc., the US hospital chain that agreed two days ago to be acquired for $21.3 billion.
- GlaxoSmithKline(GSK) may submit its pandemic flu vaccine to regulators within months after a low-dose treatment protected most people who received it in tests.
- The House of Representatives will vote this week on legislation that combines a reduced estate tax with a measure renewing two-dozen expired breaks for business including a research credit.
- Google(GOOG) will disclose to advertisers the number of clicks on ads that it deems are invalid to assuage concerns over “click fraud.”
- NYC ended fiscal 2006 on June 30 with a record $6.1 billion surplus as Wall Street profits and surging real estate values boosted tax revenue, State Comptroller Hevesi said.
- The SEC will require companies to disclose the timing and price of options awarded to executives to end abuses.

Wall Street Journal:
- Hundreds of US soldiers in Iraq and Afghanistan, along with veterans of service in those countries, have started Blogs because they say mainstream media are out of touch with events. JP Borda, who started a Web log during his National Guard deployment in Afghanistan in 2004, organized a Web site, http://Milblogging.com, to classify blogs by country, military branch and subject matter.
- US dock workers are thriving, with average salaries of as much as $120,000 a year as trade through US ports surges.
- Google(GOOG) and other US companies are struggling to find technical talent, prompting renewed debate about restrictions on visas and the need to direct students to careers in math and science.
- Wells Fargo(WFC) and other insurance and financial services companies are driving a commercial real estate and job boom in Des Moines, Iowa.
- The US government plans to pay $1.75 billion in grants so disabled people receiving Medicaid can be cared for at home rather than in institutions.

NY Post:
- Akin Gump Strauss Hauer & Feld has agreed to pay more than $100 a square foot to lease 203,000 square fee in New York, the highest rent ever paid in the city for such a large space.

AP:
- A bill to create a national Internet database to alert law enforcement and community officials where convicted sex offenders live and work passed the House of Representatives and was sent to President Bush for his signature.
- An Israeli general said his country’s military operation in Lebanon will go on several more weeks.

NY Times:
- Goldman Sachs’(GS) private equity business earned $675 million before taxes last year, more than half of which was from investment banking fees on its own transactions, citing Sanford C Bernstein.
- TiVo Inc.(TIVO) is starting a research service that will sell data to advertisers describing how its 4.4 million customers use digital video recorders to skip commercials.

Washington Post:
- Some US aviation trade bodies and manufacturers have started recruiting programs for pilots, because pilot-numbers have fallen by a quarter in the past 25 years.

London-based Times:
- Novation LLC, a Texas-based hospital purchasing group, is negotiating a $7.4 billion buying contract for Britain’s National Health Service as the UK government moves to greater privatization.

CCTV:
- China should take more measures to slow economic growth in the second half as land supply, credit and fixed-asset investment continue to grow too quickly, Premier Wen Jiabao said.

Economic Releases

- None of note

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Wednesday Watch

Late-Night Headlines
Bloomberg:
- STMicroelectronics NV(STM), Europe’s largest maker of semiconductors, said second-quarter profit rose more than 600% on higher demand for mobile-phone chips and savings from outsourcing jobs and production to Asia.
- China, France, Russia, the UK and US are close to an agreement on a UN resolution giving Iran about 30 days to stop enriching uranium or face economic penalties, US and French envoys said.

Fox News:
- The US has told Israel that it has 10-14 days to complete “a strategic blow,” against Hezbollah, citing an unidentified senior Israeli Foreign Ministry official.

DigiTimes:
- Microsoft Corp.(MSFT) plans to cut the price of its Xbox 360 video-game console by a quarter ahead of the release of Sony’s(SNE) PlayStation 3 consoles.

Late Buy/Sell Recommendations
- None of note

Night Trading
Asian Indices are -.50% to +.25% on average.
S&P 500 indicated -.02%.
NASDAQ 100 indicated -.07%.

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Earnings of Note
Company/EPS Estimate
- (AMG)/1.29
- (AKAM)/.18
- (ATI)/1.13
- (ABK)/1.74
- (BUD)/.76
- (BIDU)/.18
- (BIIB)/.49
- (BDK)/1.99
- (BA)/-.22
- (BOB)/.14
- (COP)/2.81
- (DO)/1.23
- (ESRX)/.73
- (FAF)/1.09
- (GM)/.55
- (ISRG)/.40
- (JNY)/.41
- (KMB)/.94
- (LIZ)/.45
- (LPX)/.46
- (LU)/.03
- (MSO)/-.16
- (WFR)/.42
- (MNST)/.30
- (MYL)/.28
- (NSC)/.92
- (PFCB)/.30
- (PD)/4.17
- (PX)/.71
- (PHM)/.90
- (RJF)/.45
- (REY)/2.06
- (COL)/.69
- (RUTH)/.19
- (SEE)/.72
- (SYMC)/.21
- (TEX)/1.07
- (TBL)/-.20
- (TSCO)/1.01
- (TRID)/.19
- (UARM)/.02
- (VAR)/.43
- (ZMH)/.82

Upcoming Splits
- (MDU) 3-for-2

Economic Releases
10:30 am EST
- Bloomberg consensus estimates call for a weekly crude drawdown of 500,000 barrels. Gasoline supplies are expected to remain unchanged. Distillate inventories are expected to rise 1,500,000 barrels. Finally, Refinery Utilization is expected to rise .5%.

2:00 pm EST
- Fed’s Beige Book

BOTTOM LINE: Asian indices are mixed, as gains in automakers are offsetting losses in financial stocks in the region. I expect US equities to open modestly lower and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.

Stocks Finish Near Session Highs on Lower Energy Prices, Positive Earnings, Short-covering and Bargain Hunting

Indices
S&P 500 1,268.88 +.63%
DJIA 11,103.71 +.48%
NASDAQ 2,073.90 +.58%
Russell 2000 697.44 +.97%
Wilshire 5000 12,704.13 +.74%
S&P Barra Growth 585.17 +.56%
S&P Barra Value 682.24 +.71%
Morgan Stanley Consumer 619.68 +.49%
Morgan Stanley Cyclical 781.40 +1.12%
Morgan Stanley Technology 461.69 +.15%
Transports 4,488.29 -1.76%
Utilities 433.73 +.39%
Put/Call .67 unch.
NYSE Arms .78 +49.14%
Volatility(VIX) 14.85 -.87%
ISE Sentiment 133.00 -2.92%
US Dollar 86.66 +.37%
CRB 340.74 -.57%

Futures Spot Prices
Crude Oil 73.84 +.12%
Unleaded Gasoline 228.55 +.03%
Natural Gas 6.42 +.23%
Heating Oil 195.04 +.33%
Gold 619.00 +.16%
Base Metals 222.01 +2.87%
Copper 346.10 unch.
10-year US Treasury Yield 5.06% +.36%

Leading Sectors
Steel +4.16%
Oil Service +3.37%
Telecom +2.31%

Lagging Sectors
Gaming +.08%
Hospitals -.19%
Broadcasting -.39%

Evening Review
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In Play

Afternoon Recommendations
Oppenheimer:
- Rated (LTM) Buy, target $50.

Afternoon/Evening Headlines
Bloomberg:
- The US dollar gained the most in more than a week against the euro and yen after a report showed US consumer confidence unexpectedly rose in July.
- Crude oil fell a $1.40/bbl. on speculation that the conflict between Israel and Hezbollah won’t spread in the Middle East.
- Amazon.com(AMZN) said second-quarter profit fell after it increased spending on technology and content and lost a lawsuit filed by former partner Toys “R” Us.
- Hewlett-Packard(HPQ) agreed to buy Mercury Interactive(MERQ) for about $4.5 billion.
- Corning Inc.(GLW) said second-quarter profit more than tripled, however the shares dropped after the company’s forecast fell short.

CNBC:
- Dow Chemical’s(DOW) CEO said the economy is roboust.

BOTTOM LINE: The Portfolio finished higher today on gains in my Semi longs, Biotech longs and Medical longs. I did not trade in the final hour, thus leaving the Portfolio 100% net long. The tone of the market was positive today as the advance/decline line finished higher, almost every sector rose and volume was slightly above average. Measures of investor anxiety were mostly higher into the close. Overall, today's market performance was bullish. The Johnson Redbook same-store sales index rose 2.6% year over year last week vs. a 2.9% rise the prior week. The long-term average is again of around 2.8%. I continue to see little evidence that a significant decline in consumer spending is beginning, even as investors continue to price this into stocks. I still expect retail sales to stabilize around current average levels over the intermediate term.

Stocks Rising into Final Hour on Falling Energy Prices, Positive Earnings and Short-covering

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Semi longs, Networking longs and Biotech longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is positive as the advance/decline line is higher, almost every sector is rising and volume is about average. I expect more dovish comments from Fed members over the near term to provide the catalyst for another push higher in stocks. A calming of tensions in the Middle East, lower oil prices and positive earnings reports are also potential catalysts. I continue to believe the bears have overreached by a large extent during this correction. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, bargain-hunting, positive earnings reports and lower energy prices.